Stocks kicked off the week with a thud, with the Dow and S&P 500 logging their first four-day losing streaks this year, as Treasury yields hit a two-year high amid ongoing worries over when the Federal Reserve might start to reduce its asset purchases.
"All of last week, people were trying to make the story match the market move," said Art Hogan, managing director at Lazard Capital. "If the pullback last week was due to tapering worries, then I think we may have overdone it. I was more concerned about the actual negative news—weak guidance from Cisco and earnings misses from Macy's, Wal-Mart and Kohl's."
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The Dow Jones Industrial Average dropped 70.73 points to finish at 15,010.74, closing near the psychologically-important 15,000 level, dragged by JPMorgan and Alcoa. Last week, the index suffered its worst weekly decline of 2013, shedding 2.2 percent.
The Dow and S&P 500 are on track for their biggest monthly declines since May 2012.
The CBOE Volatility Index (VIX), widely considered the best gauge of fear in the market, jumped above 15.
Most key S&P sectors finished in the red, led by energy and financials.
"The movement in the market is a bit exaggerated when volume is light and that's going to be the case over the next couple of weeks," said Hogan. "We don't have much this week but we do have a real concentration of information on Wednesday and Thursday including the Fed's meeting minutes…until we get some news in terms of what tapering is going to look like, we may be sideways this week."
With no major economic data on tap Monday, trading will likely be light as investors look ahead to the minutes of the last Fed meeting, which will be released on Wednesday, for clues as to when the central bank will start scaling back its $85 billion per month stimulus program.
(Read more: September or December taper–does it really matter?)
In Asia, China's benchmark index, the Shanghai Composite, climbed 0.8 percent as sentiment recovered, following last week's trading error at Everbright Securities. Plus, the Japanese Nikkei reversed earlier losses after posting a wider-than-expected monthly trade deficit, which cast some doubt on Prime Minister Shinzo Abe's aggressive economic policies.
(Read more: That 6% rally in China? Blame a trading goof)
On the earnings front, Saks slipped after the upscale department-store chain posted a winder-than-expected quarterly loss after weak sales. Saks became the latest retailer to post lackluster sales. Last week, Macy's, Nordstrom, Kohl's and Wal-Martall posted lower-than-expected sales. In July, Saks reached a deal to be acquired by Canada's Hudson's Bay.
Intel rallied after Piper Jaffray lifted its rating on the semiconductor company to "neutral" from "underweight" and raised its price target to $22 from $20.
Google ticked higher on the ninth anniversary of its IPO. The search-engine giant's stock has skyrocketed an impressive 900 percent since going public in 2004 at $85 apiece. Only nine other stocks have outperformed Google in the last nine years. Priceline, Apple, Netflix and Salesforce are among notable names.
JPMorgan Chase declined following weekend reports that U.S. authorities have opened a bribery investigation into whether the bank hired the children of Chinese officials to help it win lucrative business.
In the bond markets, yields on 10-year benchmark Treasurys briefly touched 2.90 percent, the highest since July 2011 amid Fed tapering concerns. So far this month, U.S. bond mutual funds and ETFs have seen outflows of $19.7 billion, according to TrimTabs.
"Heavy bond fund redemptions and the backup in bond yields should concern all investors, not just bond investors, because the U.S. economy is a highly leveraged economy that will not easily tolerate higher borrowing costs," TrimTabs CEO David Santschi said in a report.
(Read more: Bond exodus accelerates as yields creep nearer 3%)
Oil prices reversed their gains to close slightly lower but unrest in Egypt and the loss of Libyan oil exports put a limit on losses.
Oil prices are likely to drift higher this week, CNBC's weekly sentiment survey showed. However, price gains may be limited, as analysts said the uptick in political instability in Egypt had already been priced in.
"There is still too much oil," said Thomas McMahon, director of the Pan Asia Clearing Enterprise and former chief executive officer of the Singapore Mercantile Exchange. "But cheap dollars, technical disconnect and Egypt seems to be sweeping this aside. Common sense and supply demand will prevail but maybe not this week."
—By CNBC's JeeYeon Park (Follow JeeYeon on Twitter: @JeeYeonParkCNBC)
What's Happening This Week:
TUESDAY: Chicago Fed nat'l activity; Earnings from BHP Billiton, Home Depot, Medtronic, Best Buy, Dick's Sporting Goods, TJX, Barnes & Noble, JCPenney, Saks, Analog Devices, La-Z- Boy
WEDNESDAY: Mortgage applications, existing home sales, oil inventories, FOMC minutes, Office Depot annual meeting; Earnings from Target, JM Smucker, Lowe's, Staples, American Eagle, Toll Brothers, Hewlett-Packard, L Brands
THURSDAY: Jobless claims, PMI manufacturing index flash, FHFA home price index, leading indicators, natural gas inventories, Fed's Fisher speaks, Fed balance sheet/money supply, Walmart summit; Earnings from Dollar Tree, Gamestop, Gold Fields, Hormel Foods, Sears, Abercrombie & Fitch, Autodesk, Gap, Marvell, Ross Stores, Aeropostale, Pandora
FRIDAY: New home sales; Earnings from Ann, Foot Locker
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